A year ago, financially weary consumers were just getting accustomed to living with less. Now it appears they are growing more comfortable with their new-found thriftiness — and more resolute in their convictions to put the brakes on certain types of spending.
Nine out of 10 shoppers say they can live without indulgences like luxury handbags, high-end cosmetics and fine dining — things they began weaning off a year ago. They’re also willing to bid adieu to non-essentials like maid services, facials and satellite radio.
There is a handful of items that today’s consumer refuses to live without — but it’s a short list relative to what they’re willing to sacrifice. They want Internet service and basic cable or satellite TV. Also on the list of “must-haves” are basic cell phone service and occasional trips to discount stores like Walmart or Target to shop for apparel.
These findings are based on exclusive consumer research conducted for STORES by BIGresearch to determine what shoppers consider to be untouchable — suggesting they cannot live without it — and what they perceive to be expendable. The study indicates that consumers continue to assess purchasing decisions through the lens of affordability and appear even more determined to give up the “extras” than they were 12 months earlier.
“The media are doing their best to convince Americans that the economic tides are turning — especially since the numbers on Christmas selling were mostly upbeat,” says Phil Rist, executive vice president, strategic initiatives for BIGresearch. “Shoppers may have found a way to put gifts under the tree, but looking at the data, you get the distinct feeling that retailers will have to wait a while longer before shoppers return to their free-spending ways — if they ever do.”
The U.S. economy is showing signs of improvement, yet most economists remain reluctant to celebrate. They insist the recovery will be slow and painful — a side-effect brought on by debt-strapped consumers and concerns surrounding unemployment, housing and the availability of credit. Until shoppers’ attitudes about the economy brighten, the retail industry is likely to endure continued challenges.
The research bears this out. Seventy percent of the nearly 6,100 adults surveyed say they’ve cut back on more than three-quarters of the products and services alluded to in the survey — an increase of 9 percent from 2008. Eating out and springing for movie and/or theater tickets are among the areas where consumers say they’ve been most aggressive about reining in spending.
In 2008, having a maid/cleaning service ranked fifth on the list of “expendables”; this year it ranks second. Fine dining is also deemed slightly more expendable by consumers than it was 12 months ago, moving up one spot on the 2009 list.
“Over the course of the last year, consumers learned to live without and a lot of them now have a sense of pride about the steps they’ve taken to cut back — including cleaning their houses, finding drug store cosmetics that deliver results or becoming a better cook,” Rist says. “Whether or not this is a trend that continues once economic good times return is difficult to predict. But right now there’s no question that consumers are a more frugal breed than they were a few years ago.”
The survey leaves no doubt how essential the Internet has become to today’s consumer: 79 percent of respondents consider it untouchable. For most Americans, an Internet connection is now their link to the outside world, providing news, entertainment and information. Survey after survey finds that shoppers research products online before purchasing, and many feel obliged to compare prices and check for coupons. In a relatively short period of time, this capability has become as indispensable to American consumers as their morning coffee.
It’s interesting to note that consumers 55 and older are more inclined to consider Internet service essential than any other age group: 85 percent of Boomers and seniors say they want to be connected, a figure that dips to 74 percent among 18- to 34-year-olds. How is that possible? It’s likely a function of the multiple devices younger people use to access the Internet and their expectation that it should be available at every turn.
More than half of consumers also regard cable/satellite TV and basic cell phone service untouchable. The findings suggest that while Americans are willing to forego formal entertainment and have drastically cut back on dining out, they still want to watch television. And, given the fact that cable channels cater to such diverse interests, the prospect of finding something on TV that they’ll enjoy is strong.
At first glance, there don’t appear to be dramatic changes in overall consumer perceptions of what’s untouchable and expendable: The top 10 lists under each heading are nearly identical to those in 2008. But when you compare and contrast the percentages, interesting shifts emerge.
A year ago, just less than one-third of consumers described charitable contributions as untouchable; this year, 38 percent consider contributing to charities a must — an increase of 19 percent. That has the potential to be a huge boost for charities that struggled through 2009 as once-generous consumers found themselves unable to support causes to the same degree they had in the past.
Shoppers are also more inclined to consider discount shopping for apparel untouchable. Over the past 12 months, this figure increased by 14 points, suggesting that while shoppers are willing to forego pricier labels, keeping up appearances and replacing essentials is important. Likewise, the study shows a lift in the percentage of shoppers who believe a new pair of shoes is an “untouchable” purchase.
It looks as if management at casual sit-down restaurants like Applebee’s and Olive Garden will have to dig their heels in and generate new ways to serve up quality food at a value price. More than 70 percent of survey respondents cited dining at these types of restaurants as being expendable, up from 68 percent in 2008.
Slicing the data according to income yields few surprises. In nearly every instance, those with an annual household income of $50,000 or less display a stronger commitment to doing without the products and services included in the study.
There are two areas where the income-based differences are most pronounced. Sixty-five percent of those in the lower income group are willing to do without hair cuts and color services, versus 60 percent of those making more than $50,000 annually. Likewise, three-quarters of those with a lower annual income consider vacations expendable, compared with 64 percent of those earning more.
What’s considered expendable can vary widely by age. Among the 18- to 34-year-old set, 69 percent believe charitable contributions are expendable. Those 55 and older remain more willing to give; 48 percent consider charitable contributions untouchable.
The under-35 crowd regards cell phone service that comes with text, picture and video services to be untouchable; a whopping 91 percent of those 55 and up can do without all the extra bells and whistles. Accustomed to eating organic foods and sipping gourmet coffee, the younger demographic is more inclined than the 55-plus set to consider these products untouchable. Older consumers are more likely to place a higher value on meals at casual sit-down restaurants and regular trips to the salon or barber shop.
Men may be from Mars and women from Venus, but they seem to be on the same planet when it comes to prioritizing what’s expendable and what’s untouchable. Not surprisingly, women are more likely than men to deem lawn care service, extracurricular leagues and premium cable/satellite TV to be expendable; men are more inclined to give up trips to the barber, cut off charitable contributions and relinquish feature-enhanced cell service.
Still, it is interesting to note that in the majority of instances women are more apt to consider products and services to be expendable: When asked, “Have you cut back on any of the items above?” 76 percent of women responded “yes,” compared with 64 percent of men.
What does it all mean for retailers? Given that most women are both the COO and CFO of their households, it could be a long year ahead. Then again, if the economy provides women with some reasons to feel good, there’s a good chance they’ll celebrate with a bit of a spending spree: Pent-up demand can be squelched for only so long.
